Muted house prices despite above‑trend GDP
Westpac is not forecasting a housing boom from here. It is picking only modest gains of around 4% for 2026, while the Reserve Bank assumes flat prices.
Ample existing stock for sale and a robust pipeline of new residential building through 2026–27 are expected to keep a lid on house price inflation, even as GDP runs above trend.
Even so, Gordon argues that “spending growth of 3-4% over the year ahead is quite achievable in the early stages of a recovery, when the economy still has substantial spare capacity to be used up.”
Geopolitics and RBNZ stance remain key risks
Looking ahead, Westpac economists are projecting a stronger medium‑term upswing, with GDP expected to grow about 3.3% in 2026 after an estimated 1.8% expansion in 2025, and unemployment gradually easing from around 5.4% to below 5%.
Geopolitics could complicate the outlook. Escalating US–Iran tensions threaten global oil supply, pushing fuel costs and near‑term inflation higher. But Westpac expects RBNZ to look through temporary price spikes and keep rates on hold, as policymakers watch whether this rare “houseless recovery” can truly stick.